AMENDMENT OF UNION LEGISLATION

The main change introduced by the Regulation is that it entrusts to the new European
Securities and Markets Authority (ESMA)27 most of the functions relating to the registration,
deregistration and ongoing supervision of credit rating agencies, jointly with those of
the competent authority of the credit rating agency’s home Member State. Previously
these powers were shared by the Committee of European Securities Regulators and,
where appropriate, the competent authority of that Member State. In general, a noteworthy
change from the previous legislation is the reduction of the time period for the ESMA
to examine the application for registration submitted by a credit rating agency.
The ESMA is empowered to require credit rating agencies, persons involved in credit rating
activities, rated entities and related third parties, third parties to whom the credit rating agencies
have outsourced operational functions or activities and persons otherwise closely and substantially
related or connected to credit rating agencies or credit rating activities to provide
all information that is necessary in order to carry out its duties.
The ESMA may delegate specific supervisory tasks to the competent authority of a Member
State, for instance where a supervisory task requires knowledge and experience with
respect to local conditions, which are more easily available at national level. The kind of
tasks that it has to delegate include the carrying out of specific investigatory tasks and
on-site inspections.
The ESMA may impose fines on credit rating agencies, where it finds that there are serious
indications of the possible existence of facts liable to constitute one or more of the infringements
listed in the Regulation. Fines are imposed according to the level of seriousness
of the infringements. For this purpose, the Regulation establishes coefficients linked
to aggravating and mitigating circumstances in order to give the ESMA the necessary tools
to decide on a fine which is proportionate to the seriousness of an infringement. The ESMA
is empowered to take a range of measures, including, but not limited to, requiring the
credit rating agency to bring the infringement to an end, suspending the use of credit ratings
for regulatory purposes, temporarily prohibiting the credit rating agency from issuing
credit ratings and, as a last resort, withdrawing the registration when the credit rating
agency has seriously or repeatedly infringed the Regulation.
The ESMA, along with the competent authorities and the sectoral competent authorities,
shall cooperate with each other and exchange the information required for the purposes of
carrying out their duties. Also, powers are granted to the ESMA (previously to the competent
authorities of the Member States) to transmit to the national central banks, the European
System of Central Banks and the European Central Bank, in their capacity as monetary
authorities, to the European Systemic Risk Board and, where appropriate, to other
public authorities responsible for overseeing payment and settlement systems, confidential
information intended for the performance of their tasks.
Lastly, exclusive powers are granted to the ESMA (previously to the competent authorities
of the Member States) to conclude cooperation agreements on information exchange with
the supervisory authorities of third countries, provided that the information disclosed is
subject to guarantees of professional secrecy.
The Regulation came into force on 1 June 2011.